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CHAPTER 9: MEASURING SOURCES OF BRAND EQUITY: CAPURING CUSTOMER MINDSET Kevin Lane Keller Tuck CHAPTER 9: MEASURING SOURCES OF BRAND EQUITY: CAPURING CUSTOMER MINDSET Kevin Lane Keller Tuck School of Business Dartmouth College 9. 1

Qualitative Research Techniques n Free association What do you like best about the brand? Qualitative Research Techniques n Free association What do you like best about the brand? What are its positive aspects? n What do you dislike? What are its disadvantages? n What do you find unique about the brand? How is it different from other brands? In what ways is it the same? n 9. 2

Free Associations ATTRIBUTES User Imagery Product-Related Blue denim, shrink-to-fit cotton fabric, button-fly, two-horse patch, Free Associations ATTRIBUTES User Imagery Product-Related Blue denim, shrink-to-fit cotton fabric, button-fly, two-horse patch, and small red pocket tag Usage Imagery Western, American, blue collar, hard-working, traditional, strong, rugged, and masculine Appropriate for outdoor work and casual social situations Brand Personality LEVI’S 501 High quality, long lasting, and durable Functional Comfortable fitting and relaxing to wear Honest, classic, Contemporary, approachable, independent, and universal Feelings of self-confidence and self-assurance Symbolic Experiential BENEFITS 9. 3

Qualitative Research Techniques n Projective techniques n Diagnostic tools to uncover the true opinions Qualitative Research Techniques n Projective techniques n Diagnostic tools to uncover the true opinions and feelings of consumers when they are unwilling or otherwise unable to express themselves on these matters 9. 4

Projective Techniques Consumers might feel that it would be socially unacceptable to express their Projective Techniques Consumers might feel that it would be socially unacceptable to express their true feelings n Projective techniques are diagnostic tools to uncover the true opinions and feelings of consumers n Examples: n Completion and interpretation tasks n Comparison tasks n 9. 5

Projective Techniques Word association tests n Sentence completion method n Third-person technique n Role Projective Techniques Word association tests n Sentence completion method n Third-person technique n Role playing n T. A. T. n Picture frustration version of T. A. T. n

Expressive Techniques In expressive techniques, respondents are presented with a verbal or visual situation Expressive Techniques In expressive techniques, respondents are presented with a verbal or visual situation and asked to relate the feelings and attitudes of other people to the situation. Role playing. Respondents are asked to play the role or assume the behavior of someone else. Third-person technique. The respondent is presented with a verbal or visual situation and the respondent is asked to relate the beliefs and attitudes of a third person rather than directly expressing personal beliefs and attitudes. This third person may be a friend, neighbor, colleague, or a “typical” person.

Word Association Subject is presented with a list of words n Asked to respond Word Association Subject is presented with a list of words n Asked to respond with first word that comes to mind n

Word Association Examples n GREEN n n n Money Lawn Eggs and Ham Word Association Examples n GREEN n n n Money Lawn Eggs and Ham

Word Association Examples n CHEESE n n n Kraft Cheddar Goat Word Association Examples n CHEESE n n n Kraft Cheddar Goat

Word Association EXAMPLE STIMULUS washday fresh pure scrub filth bubbles MRS. M everyday and Word Association EXAMPLE STIMULUS washday fresh pure scrub filth bubbles MRS. M everyday and sweet air don't; husband does this neighborhood bath family towels squabbles dirty MRS. C ironing clean soiled clean dirt soap and water children wash

Completion Techniques In sentence completion, respondents are given incomplete sentences and asked to complete Completion Techniques In sentence completion, respondents are given incomplete sentences and asked to complete them. Generally, they are asked to use the first word or phrase that comes to mind. A person who shops at Sears is ___________ A person who receives a gift certificate good for Sak's Fifth Avenue would be _________________ J. C. Penney is most liked by _____________ When I think of shopping in a department store, I ____ A variation of sentence completion is paragraph completion, in which the respondent completes a paragraph beginning with the stimulus phrase.

Sentence Completion People who drink beer are ___________ A man who drinks light beer Sentence Completion People who drink beer are ___________ A man who drinks light beer is __________ Imported beer is most liked by __________ A woman will drink beer when__________

Completion Techniques In sentence completion, respondents are given incomplete sentences and asked to complete Completion Techniques In sentence completion, respondents are given incomplete sentences and asked to complete them. Generally, they are asked to use the first word or phrase that comes to mind. A person who shops at Sears is ___________ A person who receives a gift certificate good for Sak's Fifth Avenue would be _________________ J. C. Penney is most liked by _____________ When I think of shopping in a department store, I ____ A variation of sentence completion is paragraph completion, in which the respondent completes a paragraph beginning with the stimulus phrase.

Completion Techniques In story completion, respondents are given part of a story – enough Completion Techniques In story completion, respondents are given part of a story – enough to direct attention to a particular topic but not to hint at the ending. They are required to give the conclusion in their own words.

Construction Techniques With a picture response, the respondents are asked to describe a series Construction Techniques With a picture response, the respondents are asked to describe a series of pictures of ordinary as well as unusual events. The respondent's interpretation of the pictures gives indications of that individual's personality. In cartoon tests, cartoon characters are shown in a specific situation related to the problem. The respondents are asked to indicate what one cartoon character might say in response to the comments of another character. Cartoon tests are simpler to administer and analyze than picture response techniques.

A Cartoon Test Figure 5. 4 Sears Let’s see if we can pick up A Cartoon Test Figure 5. 4 Sears Let’s see if we can pick up some house wares at Sears.

Thematic Apperception Test T. A. T. Thematic Apperception Test T. A. T.

Thematic Apperception Test (TAT) n Construct a story about what you see on the Thematic Apperception Test (TAT) n Construct a story about what you see on the following picture Describe: - what led up to the scene - what is happening - what the characters in the story might think or feel - how the story will end

New approach: ZMET Zaltman Metaphor Elicitation Technique (ZMET) n ZMET is “a technique for New approach: ZMET Zaltman Metaphor Elicitation Technique (ZMET) n ZMET is “a technique for eliciting interconnected constructs that influence thought and behavior. ” n 9. 20

ZMET n The guided conversation consists of a series of steps that includes some ZMET n The guided conversation consists of a series of steps that includes some or all of the following: n n n n n Story telling Missed images Sorting task Construct elicitation The most representative picture Opposite images Sensory images Mental map Summary image Vignette 9. 21

ZMET n n n n Step 1. Storytelling: Participants describe the content of each ZMET n n n n Step 1. Storytelling: Participants describe the content of each picture. Step 2. Missed Image: Participants describe the picture or pictures that he or she was unable to obtain and explain their relevance. Step 3. Sorting Task: Participants sort pictures into meaningful groups and provide a label or description for each group. Step 4. Construct elicitation: Participants sort pictures into meaningful groups and provide a label or description for each group. Step 5. The Most Representative Picture: Participants indicate which picture is most representative. Step 6. Opposite Images: Participants indicate picture that describe the opposite of the brand or the task that they were given. Step 7. Sensory Images: Participants indicate what does or does not describe the concept in terms of color, emotion, sound, smell, taste, and touch. 9. 22

ZMET n n n Step 8. Mental Map: After reviewing the entire construct discussed ZMET n n n Step 8. Mental Map: After reviewing the entire construct discussed and asking Participants if the constructs are accurate representations of what was meant and if any important ideas are missing, Participants create a map or causal model connecting the constructs that have been elicited. Step 9. Summary Images: Participants create a summary image or montage using their own images (sometimes augmented by images from an image bank) to express important issues. Digital Imaging techniques may be employed to facilitate the creation of the image. Step 10. Vignette: Participants put together vignette or short video to help communicate important issues. 9. 23

Brand Personality and Values Brand personality refers to the human characteristics or traits that Brand Personality and Values Brand personality refers to the human characteristics or traits that can be attributed to a brand. n The Big Five n Sincerity (down-to-earth, wholesome, and cheerful) n Excitement (daring, spirited, imaginative, and up-todate) n Competence (reliable, intelligent, and successful) n Sophistication (upper class and charming) n Ruggedness (outdoorsy and tough) n Jennifer Aaker, 1997 9. 24

Identifying Key Brand Personality Associations BUSH Coffee n Technology n Auto n Retail n Identifying Key Brand Personality Associations BUSH Coffee n Technology n Auto n Retail n Fast Food n Dunkin’ Donuts IBM Ford Kmart Mc. Donald’s KERRY Starbucks Apple BMW Target Subway 2004 U. S. presidential election, random sample of undecided voters 9. 25

Experiential Methods n n By tapping more directly into their actual home, work, or Experiential Methods n n By tapping more directly into their actual home, work, or shopping behaviors, researchers might be able to elicit more meaningful responses from consumers. Advocates of the experiential approach have sent researchers to consumers’ homes in the morning to see how they approach their days, given business travelers Polaroid cameras and diaries to capture their feelings when in hotel rooms, and conducted “beeper studies” in which participants are instructed to write down what they’re doing when they are paged. 9. 26

Quantitative Research Techniques Awareness n Image n Brand responses n Brand relationships n 9. Quantitative Research Techniques Awareness n Image n Brand responses n Brand relationships n 9. 27

Awareness n Recognition n n Ability of consumers to identify the brand (and its Awareness n Recognition n n Ability of consumers to identify the brand (and its elements) under various circumstances Recall Ability of consumers to retrieve the actual brand elements from memory n Unaided vs. aided recall n 9. 28

Awareness n Corrections for guessing n n Any research measure must consider the issue Awareness n Corrections for guessing n n Any research measure must consider the issue of consumers making up responses or guessing. Strategic implications n n The advantage of aided recall measures is that they yield insight into how brand knowledge is organized in memory and what kind of cues or reminders may be necessary for consumers to be able to retrieve the brand from memory. The important point to note is that the category structure that exists in consumers’ minds—as reflected by brand recall performance—can have profound implications for consumer choice and marketing strategy. 9. 29

Image n n Ask open-ended questions to tap into the strength, favorability, and uniqueness Image n n Ask open-ended questions to tap into the strength, favorability, and uniqueness of brand associations. These associations should be rated on scales for quantitative analysis. 9. 30

Brand Responses n n Research in psychology suggests that purchase intentions are most likely Brand Responses n n Research in psychology suggests that purchase intentions are most likely to be predictive of actual purchase when there is correspondence between the two in the following categories: Purchase Intentions n n Action (buying for own use or to give as a gift) Target (specific type of product and brand) Context (in what type of store based on what prices and other conditions) Time (within a week, month, or year) 9. 31

Brand Relationships Behavioral loyalty n Brand substitutability n Other brand resonance dimensions n n Brand Relationships Behavioral loyalty n Brand substitutability n Other brand resonance dimensions n n For example, in terms of engagement, measures could explore word-of-mouth behavior, online behavior, and so forth in depth 9. 32

Comprehensive Models of Customer-Based Brand Equity Brand dynamics n Equity engines n Young & Comprehensive Models of Customer-Based Brand Equity Brand dynamics n Equity engines n Young & Rubicam’s Brand Asset Valuator (BAV) n 9. 33

Brand Dynamics The Brand Dynamics model adopts a hierarchical approach to determine the strength Brand Dynamics The Brand Dynamics model adopts a hierarchical approach to determine the strength of relationship a consumer has with a brand. n The five levels of the model are: n Presence n Relevance n Performance n Advantage n Bonding n 9. 34

Equity Engines n This model delineates three key dimensions of brand affinity—the emotional and Equity Engines n This model delineates three key dimensions of brand affinity—the emotional and intangible benefits of a brand—as follows: n n n Authority: The reputation of a brand, whether as a longstanding leader or as a pioneer in innovation Identification: The closeness customers feel for a brand how well they feel the brand matches their personal needs Approval: The way a brand fits into the wider social matrix and the intangible status it holds for experts and friends 9. 35

Young & Rubicam’s Brand Asset Valuator (BAV) n n There are five key components Young & Rubicam’s Brand Asset Valuator (BAV) n n There are five key components of brand health in BAV —the five pillars. Each pillar is derived from various measures that relate to different aspects of consumers’ brand perceptions and that together trace the progression of a brand’s development. n n n Differentiation Energy Relevance Esteem Knowledge 9. 36

Brand. Asset® Valuator (BAV) n n n n 240, 000+ consumers Up to 181 Brand. Asset® Valuator (BAV) n n n n 240, 000+ consumers Up to 181 categories 137 studies 40 countries 8 years 56 different brand metrics Common methodology 9. 37

How Brands Are Built Four Primary Aspects Knowledge • The culmination of brand building How Brands Are Built Four Primary Aspects Knowledge • The culmination of brand building efforts; acquisition of consumer experience Esteem • Consumer respect, regard, reputation; a fulfillment of perceived consumer promise Relevance • Relates to usage and subsumes the five Ps of marketing; relates to sale Differentiation • The basis for consumer choice; the essence of the brand, source of margin 9. 38

Healthy Brands Have Greater Differentiation than Relevance 100 D>R 90 Examples: 80 70 Harley Healthy Brands Have Greater Differentiation than Relevance 100 D>R 90 Examples: 80 70 Harley Davidson Yahoo! AOL Williams-Sonoma Ikea Bloomberg Business News 60 50 40 30 20 10 0 Differentiation Relevance Room to grow. . . Brand has power to build relevance. 9. 39

Brands with greater Relevance than Differentiation Are in Danger of Becoming Commodities R>D 100 Brands with greater Relevance than Differentiation Are in Danger of Becoming Commodities R>D 100 90 Examples: 80 70 60 50 40 30 20 10 0 Differentiation Relevance Exxon Mott’s Mc. Donald’s Crest Minute Maid Fruit of the Loom Peter Pan (peanut butter) Uniqueness has faded; price becomes dominant reason to buy. 9. 40

More Esteem than Knowledge Means, “I’d like to get to know you better” 100 More Esteem than Knowledge Means, “I’d like to get to know you better” 100 E>K 90 Examples: 80 70 60 50 40 30 20 10 0 Esteem Knowledge Coach leatherwear Tag Heuer Calphalon Movado Blaupunkt Pella Windows Palm Pilot Technics Brand is better liked than known. 9. 41

Too Much Knowledge Can Be Dangerous: “I know you and you’re nothing special” K>E Too Much Knowledge Can Be Dangerous: “I know you and you’re nothing special” K>E 100 90 Examples: 80 70 60 50 40 30 20 10 0 Esteem Knowledge Plymouth TV Guide Spam Woolworths Chrysler Maxwell House National Enquirer Sanka Brand is better known than liked. 9. 42

A Two-Dimensional Framework for Diagnosing Brands: The Power Grid Brand. Asset® Valuator Brand Strength A Two-Dimensional Framework for Diagnosing Brands: The Power Grid Brand. Asset® Valuator Brand Strength Differentiation Leading Relevance Brand Stature Esteem Knowledge Lagging 9. 43

Brand Health Is Captured on the Power. Grid BRAND STRENGTH (Differentiation and Relevance) Niche/ Brand Health Is Captured on the Power. Grid BRAND STRENGTH (Differentiation and Relevance) Niche/ Unrealized Potential Base: USA Total Adults BAV 2000 Power Leaders Declining Leaders Eroded New Unfocused BRAND STATURE (Esteem and Knowledge) 9. 44

USA 1999 Power. Grid Sample 100 Arizona Iced Tea Aeropostale Newman’s Own Sundance Channel USA 1999 Power. Grid Sample 100 Arizona Iced Tea Aeropostale Newman’s Own Sundance Channel Dream. Works Bloomberg Business News CDnow IKEA San Pellegrino Sun Microsystems Wired Quest Telecomm Nokia i. Village. com Net. Grocer Iridium BRAND STRENGTH 80 60 40 20 Coca-Cola Ocean Spray Nike Pepperidge Farm M&Ms Disney Jeopardy! Hallmark Plymouth Bazooka Ivory Snow Pert Rolaids Keds Howard Johnson TWA Greyhound 0 0 Base: USA Total Adults BAV 1999 20 40 60 80 100 BRAND STATURE 9. 45

Y&R Resonance Research Resonance (10%) Community Engagement 15% Attachment (30%) Loyalty (60%) Usage Base: Y&R Resonance Research Resonance (10%) Community Engagement 15% Attachment (30%) Loyalty (60%) Usage Base: 2001 BAV Data 9. 46

Y&R Resonance Research with BAV Resonance Engaged 100 Differentiation Community Attached Engaged Loyal Brand Y&R Resonance Research with BAV Resonance Engaged 100 Differentiation Community Attached Engaged Loyal Brand Strength Community Non-Loyals 50 Attached Loyal Users Non-Loyal Users 0 0 50 100 Brand Stature Base: BAV USA Adults 2001 9. 47

Average U. S. Packaged Goods Brand Proportion of Consumers Consumer Loyalty 7% Bonded 38% Average U. S. Packaged Goods Brand Proportion of Consumers Consumer Loyalty 7% Bonded 38% 32% Advantage 20% 35% Performance 19% 43% Relevance 17% 76% Presence 13% 9. 48

Commonalty Between the Basic BAV Model and the CBBE Framework n n n BAV’s Commonalty Between the Basic BAV Model and the CBBE Framework n n n BAV’s knowledge relates to CBBE’s brand awareness and familiarity. BAV’s esteem relates to CBBE’s favorability of brand associations. BAV’s relevance relates to CBBE’s strength of brand associations (as well as perhaps favorability). BAV’s energy relates to CBBE’s favorability of associations. BAV’s differentiation relates to CBBE’s uniqueness of brand associations. 9. 49

CHAPTER 10: MEASURING OUTCOMES OF BRAND EQUITY: CAPURING MARKET PERFORMANCE Kevin Lane Keller Tuck CHAPTER 10: MEASURING OUTCOMES OF BRAND EQUITY: CAPURING MARKET PERFORMANCE Kevin Lane Keller Tuck School of Business Dartmouth College 10. 50

Measuring Brand Equity Multi-dimensional concept n Many different measures required n The ultimate value Measuring Brand Equity Multi-dimensional concept n Many different measures required n The ultimate value of a brand depends on the underlying components of brand knowledge and sources of brand equity n 10. 51

Comparative Methods Brand-based comparative approaches n Marketing-based comparative approaches n Conjoint analysis n 10. Comparative Methods Brand-based comparative approaches n Marketing-based comparative approaches n Conjoint analysis n 10. 52

Brand-Based Approaches The marketing element under consideration is fixed. n Consumer response is examined Brand-Based Approaches The marketing element under consideration is fixed. n Consumer response is examined based on changes in brand identification. n Application example: Blind testing n Advantage: Isolates the value of the brand n Disadvantage: The totality of what is learned depends on how many applications are examined. n 10. 53

Marketing-Based Approaches The brand is held fixed and consumer response is examined based on Marketing-Based Approaches The brand is held fixed and consumer response is examined based on changes in marketing programs. n Applications: Explore price premiums’ effect on switching, consumer evaluations of marketing activities, brand extensions, etc. n Advantage: Ease of implementation n Disadvantage: Difficult to determine whether consumer responses are caused by brand knowledge or generic product knowledge n 10. 54

Conjoint Analysis n n n A survey-based multivariate technique that enables marketers to profile Conjoint Analysis n n n A survey-based multivariate technique that enables marketers to profile the consumer decision process with respect to products and brands Helps researchers determine the trade-offs consumers make between brand attributes Applications: Assess advertising effectiveness and brand value; analyze brand/price trade-off Advantage: Allows for different brands or different aspects of the product to be analyzed simultaneously Disadvantage: May violate consumers’ expectations based on what they already know about brands 10. 55

Example: Laptop Profiles Brand Hard Drive RAM Screen Price A B Dell 320 GB Example: Laptop Profiles Brand Hard Drive RAM Screen Price A B Dell 320 GB 2 GB 15. 4 in $1, 200 9 6 Apple 320 GB 4 GB 15. 4 in $1, 200 6 12 Dell 160 GB 4 GB 15. 4 in $900 12 5 Apple 320 GB 2 GB 15. 4 in $900 11 11 Dell 320 GB 4 GB 12. 1 in $1, 500 4 3 Apple 320 GB 2 GB 12. 1 in $1, 500 1 9 Apple 160 GB 4 GB 15. 4 in $1, 500 3 10 Apple 160 GB 2 GB 12. 1 in $900 8 7 Apple 160 GB 4 GB 12. 1 in $1, 200 5 8 Dell 160 GB 2 GB 12. 1 in $1, 200 7 1 Dell 320 GB 4 GB 12. 1 in $900 10 4 Dell 160 GB 2 GB 15. 4 in $1, 500 2 2

Holistic Methods Attempt to place an overall value on the brand in either abstract Holistic Methods Attempt to place an overall value on the brand in either abstract utility terms or concrete financial terms n Net out various considerations to determine the unique contribution of the brand n Holistic methods: n Residual approaches n Valuation approaches n 10. 57

Residual Approaches Examine the value of the brand by subtracting consumers’ preferences based on Residual Approaches Examine the value of the brand by subtracting consumers’ preferences based on physical product attributes alone from their overall brand preferences n Advantage: Useful benchmark for interpreting brand equity, especially from a financially oriented perspective n Disadvantage: Static view. Limited diagnostic value for strategic decision making n 10. 58

Valuation Approaches Attempt to place a financial value on brand equity for accounting purposes Valuation Approaches Attempt to place a financial value on brand equity for accounting purposes n Useful in cases of mergers and acquisitions, brand licensing, fund raising, and brand management decisions n Valuation approaches: n Accounting background n Historical perspectives n General approaches n Interbrand’s brand valuation methodology n 10. 59

Accounting Background Intangible assets are typically lumped under the heading of goodwill and include Accounting Background Intangible assets are typically lumped under the heading of goodwill and include things such as patents, trademarks, and licensing agreements, as well as “softer” considerations such as the skill of the management and customer relations. n In an acquisition, the goodwill item often includes a premium paid to gain control, which, in certain instances, may even exceed the value of tangible and intangible assets. n 10. 60

Historical Perspectives n n n In Australia Rupert Murdoch’s News Corporation included a valuation Historical Perspectives n n n In Australia Rupert Murdoch’s News Corporation included a valuation of some of its magazines on its balance sheets in 1984. British firms used brand values primarily to boost their balance sheets. In the United States, generally accepted accounting principles mean that placing a brand on the balance sheet would require amortization of that asset for up to 40 years. Such a charge would severely hamper firm profitability; as a result, firms avoid such accounting maneuvers. 10. 61

General Approaches n In determining the value of a brand in an acquisition or General Approaches n In determining the value of a brand in an acquisition or merger, firms can choose from three main approaches: n n n Cost approach: Brand equity is the amount of money that would be required to reproduce or replace the brand Market approach: The present value of the future economic benefits to be derived by the owner of the asset Income approach: The discounted future cash flow from the future earnings stream for the brand 10. 62

Interbrand’s Brand Valuation n n Assumes that brand value is the present worth of Interbrand’s Brand Valuation n n Assumes that brand value is the present worth of the benefits of future ownership Follows five valuation steps: n n n Market segmentation Financial (role of branding) analysis Demand (brand strength) analysis Competitive benchmarking Brand value calculation : Calculate the brand value as the net present value (NPV) of the forecast brand earnings, discounted by the brand discount rate 10. 63

Interbrand’s Brand Valuation 1. Market segmentation. Brands influence customer choice, but the influence varies Interbrand’s Brand Valuation 1. Market segmentation. Brands influence customer choice, but the influence varies depending on the market in which the brand operates. The brand is valued in each segment and the sum of the segment valuations constitutes the total value of the brand. 2. Financial analysis. Identify and forecast revenues and earnings from intangibles generated by the brand for each of the distinct segments determined in Step 1. Intangible earnings are defined as brand revenue less operating costs, applicable taxes and a charge for the capital employed. The concept is similar to the notion of economic profit. 10. 64

Interbrand’s Brand Valuation 3. Demand analysis. Assess the role that the brand plays in Interbrand’s Brand Valuation 3. Demand analysis. Assess the role that the brand plays in driving demand for products and services in the markets in which it operates, and determine what proportion of intangible earnings is attributable to the brand measured by an indicator referred to as the “role of branding index. ” This is done by first identifying the various drivers of demand for the branded business, then determining the degree to which each driver is directly influenced by the brand. The role of branding index represents the percentage of intangible earnings that are generated by the brand. Brand earnings are calculated by multiplying the role of branding index by intangible earnings. 10. 65

Interbrand’s Brand Valuation 4. Competitive benchmarking. Determine the competitive strengths and weaknesses of the Interbrand’s Brand Valuation 4. Competitive benchmarking. Determine the competitive strengths and weaknesses of the brand to derive the specific brand discount rate that reflects the risk profile of its expected future earnings (this is measured by an indicator referred to as the “brand strength score”). This comprises extensive competitive benchmarking and a structured evaluation of the brand’s market, stability, leadership position, growth trend, support, geographic footprint and legal protectability. 5. Brand value calculation. Brand value is the net present value (NPV) of the forecast brand earnings, discounted by the brand discount rate. The NPV calculation comprises both the forecast period and the period beyond, reflecting the ability of brands to continue generating future earnings. 10. 66

CHAPTER 11: DESIGNING AND IMPLEMENTING BRANDING STRATEGIES Kevin Lane Keller Tuck School of Business CHAPTER 11: DESIGNING AND IMPLEMENTING BRANDING STRATEGIES Kevin Lane Keller Tuck School of Business Dartmouth College 11. 67

Branding strategy is critical because it is the means by which the firm can Branding strategy is critical because it is the means by which the firm can help consumers understand its products and services and organize them in their minds. n Two important strategic tools: The brand-product matrix and the brand hierarchy help to characterize and formulate branding strategies by defining various relationships among brands and products. n 11. 68

Branding Strategy or Brand Architecture n The branding strategy for a firm reflects the Branding Strategy or Brand Architecture n The branding strategy for a firm reflects the number and nature of common or distinctive brand elements applied to the different products sold by the firm. n Which brand elements can be applied to which products and the nature of new and existing brand elements to be applied to new products 11. 69

The role of Brand Architecture n Clarify: brand awareness n n Improve consumer understanding The role of Brand Architecture n Clarify: brand awareness n n Improve consumer understanding and communicate similarity and differences between individual products Motivate: brand image n Maximize transfer of equity to/from the brand to individual products to improve trial and repeat purchase 11. 70

Brand-Product Matrix 1 Products 2 3 4 A Brands B C n Must define: Brand-Product Matrix 1 Products 2 3 4 A Brands B C n Must define: n Brand-Product relationships (rows) n n Line and category extensions Product-Brand relationships (columns) n Brand portfolio 11. 71

Important Definitions n Product line n n Product mix (product assortment) n n A Important Definitions n Product line n n Product mix (product assortment) n n A group pf products within a product category that are closely related The set of all product lines and items that a particular seller makes available to buyers Brand mix (brand assortment) n The set of all brand lines that a particular seller makes available to buyers 11. 72

Breadth of a Branding Strategy n Breadth of product mix Aggregate market factors n Breadth of a Branding Strategy n Breadth of product mix Aggregate market factors n Category factors n Environmental factors n n Depth of product mix Examining the percentage of sales and profits contributed by each item in the product line n Deciding to increase the length of the product line by adding new variants or items typically expands market coverage and therefore market share but also increases costs n 11. 73

Depth of a Branding Strategy The number and nature of different brands marketed in Depth of a Branding Strategy The number and nature of different brands marketed in the product class sold by a firm n Referred to as brand portfolio n The reason is to pursue different market segments, different channels of distribution, or different geographic boundaries n Maximize market coverage and minimize brand overlap n 11. 74

Ford Brand Portfolio 11. 75 Ford Brand Portfolio 11. 75

Designing a Brand Portfolio n Basic principles: Maximize market coverage so that no potential Designing a Brand Portfolio n Basic principles: Maximize market coverage so that no potential customers are being ignored n Minimize brand overlap so that brands aren’t competing among themselves to gain the same customer’s approval n 11. 76

Brand Roles in the Portfolio Flankers: Flanker or Brand Roles in the Portfolio Flankers: Flanker or "fighter" brands are positioned with respect to competitors' brands so that more important (and more profitable) flagship brands can retain their desired positioning. n Cash cows: Some brands may be kept around despite dwindling sales because they still manage to hold on to a sufficient number of customers and maintain their profitability with virtually no marketing support. These "cash cow" brands can be effectively "milked" by capitalizing on their reservoir of existing brand equity. n 11. 77

Brand Roles in the Portfolio n Low-end entry-level: The role of a relatively lowpriced Brand Roles in the Portfolio n Low-end entry-level: The role of a relatively lowpriced brand in the brand portfolio often may be to attract customers. Retailers like to feature these "traffic builders" because they are able to "trade up" customers to a higher-priced brand. For example, BMW introduced certain models into its 3 -series automobiles in part as a means of bringing new customers into the brand franchise with the hope of later "moving them up" to higher-priced models when they later decided to trade in their cars. 11. 78

Brand Roles in the Portfolio n High-end prestige brands: The role of a relatively Brand Roles in the Portfolio n High-end prestige brands: The role of a relatively high-priced brand in the brand family often is to add prestige and credibility to the entire portfolio. For example, one analyst argued that the real value of its Corvette high performance sports car to Chevrolet was in "its ability to lure curious customers into showrooms and at the same time help improve the image of other Chevrolet cars. 11. 79

Brand Hierarchy A means of summarizing the branding strategy by displaying the number and Brand Hierarchy A means of summarizing the branding strategy by displaying the number and nature of common and distinctive brand elements across the firm’s products, revealing the explicit ordering of brand elements n A useful means of graphically portraying a firm’s branding strategy n 11. 80

Brand Hierarchy Tree: Toyota Corporation Toyota (Trucks) Corolla CE S LE Toyota (SUV/vans) Camry Brand Hierarchy Tree: Toyota Corporation Toyota (Trucks) Corolla CE S LE Toyota (SUV/vans) Camry SE LE XLE Avalon Platinum Edition XL XLS Toyota (Cars) Celica Toyota Financial Services ECHO Matrix Lexus MR 2 Spyder Prius SE SLE 11. 81

Brand Hierarchy Levels Corporate Brand (General Motors) Family Brand (Buick) Individual Brand (Park Avenue) Brand Hierarchy Levels Corporate Brand (General Motors) Family Brand (Buick) Individual Brand (Park Avenue) Modifier: Item or Model (Ultra) 11. 82

Corporate Brand Equity Occurs when relevant constituents hold strong, favorable, and unique associations about Corporate Brand Equity Occurs when relevant constituents hold strong, favorable, and unique associations about the corporate brand in memory n Encompasses a much wider range of associations than a product brand n 11. 83

Family Brands applied across a range of product categories n An efficient means to Family Brands applied across a range of product categories n An efficient means to link common associations to multiple but distinct products n 11. 84

Individual Brands Restricted to essentially one product category n There may be multiple product Individual Brands Restricted to essentially one product category n There may be multiple product types offered on the basis of different models, package sizes, flavors, etc. n 11. 85

Modifiers Signals refinements or differences in the brand related to factors such as quality Modifiers Signals refinements or differences in the brand related to factors such as quality levels, attributes, functions, etc. n Plays an important organizing role in communicating how different products within a category that share the same brand name are n 11. 86

Corporate Image Dimensions n Corporate product attributes, benefits or attitudes n n n People Corporate Image Dimensions n Corporate product attributes, benefits or attitudes n n n People and relationships n n Customer orientation Values and programs n n n Quality Innovativeness Concern with the environment Social responsibility Corporate credibility n n n Expertise Trustworthiness Likability 11. 87

Brand Hierarchy Decisions The number of levels of the hierarchy to use in general Brand Hierarchy Decisions The number of levels of the hierarchy to use in general n How brand elements from different levels of the hierarchy are combined, if at all, for any one particular product n How any one brand element is linked, if at all, to multiple products n Desired brand awareness and image at each level n 11. 88

Number of Hierarchy Levels n Principle of simplicity n n Employ as few levels Number of Hierarchy Levels n Principle of simplicity n n Employ as few levels as possible Principle of clarity n Logic and relationship of all brand elements employed must be obvious and transparent 11. 89

Levels of Awareness and Associations n Principle of relevance n n Create global associations Levels of Awareness and Associations n Principle of relevance n n Create global associations that are relevant across as many individual items as possible Principle of differentiation n Differentiate individual items and brands 11. 90

Linking Brands at Different Levels n Principle of prominence n The relative prominence of Linking Brands at Different Levels n Principle of prominence n The relative prominence of brand elements affects perceptions of product distance and the type of image created for new products 11. 91

Linking Brands Across Products n Principle of commonality n The more common elements shared Linking Brands Across Products n Principle of commonality n The more common elements shared by products, the stronger the linkages 11. 92

Brand Architecture Guidelines n n n Adopt a strong customer focus Avoid over-branding Establish Brand Architecture Guidelines n n n Adopt a strong customer focus Avoid over-branding Establish rules and conventions and be disciplined Create broad, robust brand platforms Selectively employ sub-brands as means of complementing and strengthening brands Selectively extend brands to establish new brand equity and enhance existing brand equity 11. 93

Corporate Brand Campaign n Different objectives are possible: n n n Build awareness of Corporate Brand Campaign n Different objectives are possible: n n n Build awareness of the company and the nature of its business Create favorable attitudes and perceptions of company credibility Link beliefs that can be leveraged by product-specific marketing Make a favorable impression on the financial community Motivate present employees and attract better recruits Influence public opinion on issues 11. 94

Using Cause Marketing to Build Brand Equity n The process of formulating and implementing Using Cause Marketing to Build Brand Equity n The process of formulating and implementing marketing activities that are characterized by an offer from the firm to contribute a specified amount to a designated cause when customers engage in revenue-providing exchanges that satisfy organizational and individual objectives 11. 95

Advantages of Cause Marketing Building brand awareness n Enhancing brand image n Establishing brand Advantages of Cause Marketing Building brand awareness n Enhancing brand image n Establishing brand credibility n Evoking brand feelings n Creating a sense of brand community n Eliciting brand engagement n 11. 96

Green Marketing A special case of cause marketing that is particularly concerned with the Green Marketing A special case of cause marketing that is particularly concerned with the environment n Explosion of environmentally friendly products and marketing programs n 11. 97

Crisis Marketing Guidelines n The two keys to effectively managing a crisis are that Crisis Marketing Guidelines n The two keys to effectively managing a crisis are that the firm’s response should be swift and that it should be sincere. 11. 98